Crocs (CROX -1.00%) shares soared following the casual footwear company's Q4 earnings report, as its namesake brand saw solid sales while there were signs of a turnaround at its struggling HeyDude brand. Nonetheless, the stock is still down slightly over the past year.

Let's take a closer look at Crocs' Q4 results and outlook to see whether or not it's too late to buy the stock.

HeyDude turnaround showing progress

The performance between Crocs' namesake brand and HeyDude, which it acquired in 2022, have diverged over the past couple of years, with the Crocs brand seeing solid growth while HeyDude has struggled.

However, there were some signs in Q4 that the HeyDude brand is on the road to recovery. Sales for the quarter were flattish at $228 million, which was a big improvement from the more than 17% revenue declines the brand saw during each of the first three quarters of the year. While wholesale revenue fell 8.6% to $95 million, direct-to-consumer (DTC) sales climbed 7.2% to $133 million.

The company credited the turnaround to new products that were supported by compelling marketing, noting it saw strong brand engagement over the holidays on TikTok. It said its strategy to focus on younger female consumers was paying off, with 160% growth in new female customers ages 18 to 24 years old. Crocs said celebrity endorsers were helping reestablish the brand, highlighting a digital marketing campaign featuring Sydney Sweeney that helped sell out a DTC exclusive offering in two days.

The Crocs brand, meanwhile, remains solid, with revenue rising 4% to $762 million. Crocs brand DTC's revenue rose 5% to $447 million, with comparable DTC revenue edged up 0.3%. Wholesale revenue rose by 2.7% to $315 million. International growth led the way, with sales jumping 11.5% to $291 million, while North America revenue was flat at $471 million.

Overall revenue increased by 3.1% to $990 million, which was ahead of its flat to slightly up revenue guidance. DTC revenue grew 5.5%, while wholesale revenue edged down 0.2%. Gross margins expanded by 260 basis points to 57.9%.

However, adjusted EPS decreased 2.3% to $2.52, as the company ramped up marketing spending and invested in its DTC business. That was nonetheless much higher than its $2.20-to-$2.28 adjusted EPS guidance.

Data source: Crocs.

The company ended the year with net debt of $1.17 billion, down from $1.52 billion a year ago. It also spent $225 million buying back 2 million shares in the quarter.

Looking ahead, Crocs guided for 2025 sales to rise between 2% to 2.5%, with Crocs brand revenue increasing by around 4.5% and HeyDude revenue to decline by between 7% to 9%. It is looking for adjusted EPS of between of $12.70 to $13.15, compared to $13.17 in 2024.

For the Crocs brand, it expects innovations such as its new In Motion clog, which combines its light ride and free feel technology, and expansion of its Echo franchise to help drive 2025 revenue. It is also looking to continue to expand its sandals franchise, which only represents about 13% of its sales. Meanwhile, it continues to expect low-double-digit international growth on a constant-currency basis over the medium term.

For Q1, the company is looking for revenue to fall by 1.5%. It is projecting Crocs brand revenue to be flat to down approximately 1%, with HeyDude sales down 14% to 16% due to wholesale declines.

Image source: Getty Images

Can Crocs stock continue to rally?

From a valuation standpoint, Crocs' stock remains inexpensive, trading at a forward price-to-earnings ratio (P/E) of only 8, based on the high end of its 2025 adjusted EPS guidance. Meanwhile, its forecast looks conservative, with the opportunity for the company to exceed expectations. The Crocs brand is doing well, led by international growth. Meanwhile, it has a nice opportunity in expanding its sandal business.

However, turning around the underperforming HeyDude brand is its biggest opportunity. It managed to get sales growth to flattish in Q4, while continuing to clean up its wholesale business and getting back to more full-price selling. It obviously has more work to do, but its guidance looks conservative if it can continue the momentum it is seeing it the HeyDude DTC business.

Furthermore, the company generates a lot of cash that can be used to repay the debt it took on to buy HeyDude and to continue to buy back shares of its undervalued stock. In 2024, it produced $923.2 million in free cash flow, so it has a lot of financial flexibility.

Given the stock's valuation and the progress the company is making turning around HeyDude, I don't think it's too late to buy the stock, even after the recent jump in price.